Open Banking
Open Banking
June 21, 2024
5 min

Real-Time Payments vs. ACH: Which Should Your Business Use?


When it comes to payments, speed and convenience are king … right?

While ACH payments have served organizations well for decades, real-time payment (RTP) options promise funds availability in minutes rather than days. For the first time, immediate payment functionality is becoming the standard across many industries.

In this guide, we’ll compare RTP and ACH payments head to head and determine which payment rail is best for your business.

What Are ACH Payments?

ACH payments, short for Automated Clearing House, is an account-to-account payment solution in the United States where batches of transactions are processed a few times each day. 

Businesses often utilize ACH payments to facilitate direct deposit paychecks, manage recurring expenses, and handle customer payments such as subscriptions or loan repayments. On the consumer side, many people rely on ACH for bill payments, receiving salaries, and transferring funds between accounts.

Some key features of ACH payments

  • Transactions are processed in batches within 1-3 business days of initiation, allowing for a lower processing costs when compared to RTP.
  • ACH payments involve indirect routing where the originating bank sends funds through an intermediary ACH operator before reaching the recipient’s bank account. This multi-step process is what makes the 1-3 day settlement period possible.
  • Common business applications include payroll processing, rent or mortgage payments, supplier bill settlements, and automated customer payments.

What Are Real-Time Payments? 

Real-time payment systems have emerged as a faster alternative to traditional ACH transfers for businesses and consumers. These instant payments provide businesses the capability to send and receive electronic funds immediately 24/7 and have settlement occur within seconds or minutes.

In the United States, the real-time payment infrastructure is called The Clearing House's RTP® network. Launched in 2017, it enables financial institutions to process payments and settle funds in real-time between participating banks using a secure, centralized rail. The same-day availability of funds is a major improvement over the typical 1-3 day wait with ACH.

Business adoption of real-time payments is growing as more companies recognize the value of speed and flexibility they provide. Some ways organizations are using real-time transfers include: 

  • Paying freelancers and contractors immediately
  • Handling unexpected invoices the same day
  • Providing refunds or credits to customers instantly

The ability to push (ACH credit) or pull (ACH debit) funds in real-time opens up new revenue opportunities as well. And as new Open Banking practices allow real-time payment rails to continue building out worldwide, their role in business-to-business and B2C commerce will likely continue expanding in the coming years.

What Is the Difference Between RTP and ACH?

There are several factors that need to be taken into account when you’re comparing payment rails. There is no “best” payment rail. However, depending on your needs and specific use case, one may offer clear advantages over the other.

Here’s how ACH and RTP payments stack up head to head.

Processing Speed and Availability of Funds

One of the most substantial differences between these payment methods is the speed of processing and availability of funds. ACH payments follow a batched processing cycle, typically completed within 1 to 3 business days. In contrast, these faster payments settle instantly upon initiation, with funds available to the recipient within seconds or minutes.

For customers and merchants, the faster settlement that real-time payment networks provide also translates directly into more immediate access to funds. With ACH, consumers typically see deposits take 1-3 days to clear and become usable. Merchants must also wait to access received ACH payments. Real-time systems remove this lag by crediting the recipient's account balance instantly.

This immediate availability creates a more seamless customer experience — for example, customers can use funds from a paycheck or deposit right away rather than waiting multiple days, and merchants can receive electronic payments upfront rather than delaying the balance.

Overall, the significantly faster processing windows and same-day availability of real-time payments open up new possibilities that batch-processed ACH simply cannot enable due to its multi-day settlement cycles. For any application requiring swift access to funds, real-time payment rails offer huge advantages for ACH.

Use Cases for ACH vs. RTP

As a batch-processing system, ACH is well-suited for predictable, recurring payments that can be scheduled in advance. Common examples include:

  • Payroll: Direct deposit paychecks are easily automated through ACH on a set pay schedule.
  • Bill pay: Recurring household bills like rent, utilities, and subscriptions can be reliably paid each month. 
  • Receivables: Companies can offer customers a simple ACH debit option for automatic payments.

And while ACH excels at scheduled transfers, real-time payment rails open up entirely new on-demand use cases that require funds to be immediately available to its users. Some RTP use cases include:

  • Freelancer/contractor pay: Companies can pay sole proprietors, consultants, or temporary staff the same day work is submitted or completed. 
  • Vendor/supplier pay: Immediate payment of invoices as they arrive rather than waiting multiple days.
  • Refunds/returns: Providing customer refunds or credits in real-time improves the shopping experience. 
  • P2P transfers: Individuals can send and receive funds instantly between accounts for sharing expenses.
  • Marketplaces: Platforms require seamless, confirmation-less transactions between buyers and sellers.

As these examples show, each system has advantages depending on your specific use case, from different payment scenarios to business models.

Cost Structures of ACH vs. RTP

While ACH transactions are typically cheaper per item than real-time payment rails, their fees vary significantly between financial institutions. As a baseline, most banks charge $0.15-$0.25 to send an ACH payment and $0.05-$0.10 to receive one. However, real-time payment fees tend to range from $0.25-$0.50 per transaction.

However, real-time payment networks are still in growth phases, and costs are expected to decline substantially as volume scales up and Open Banking practices become the norm. Additionally, next-day ACH now charges premiums, narrowing the price gap between these two payment rail options.

But there’s much more to the total costs of these payment rails than their transaction fees alone.

Adopting real-time payment rail capabilities also requires investment to integrate compatible payment APIs, test transactions, and configure internal systems. This upfront technical work represents an additional cost barrier that many organizations already using ACH may prefer to avoid.

But, as real-time payments become more popular, vendors are making them easier for businesses to adopt. The influx of new Open Banking platforms like Trustly are taking the complexity out of linking an organization's real-time systems to their existing payment processes. Over time, the cost of sticking with older technologies may also exceed the cost of upgrading—especially for companies processing many payments at one time.

Differences in Fraud Mitigation

While real-time payments are fast, this could be a huge problem for companies if someone tries to use them to commit fraud. Since funds are available immediately, it would be much harder to recover them if a transaction turns out to be fraudulent. However, the banks that run these payment networks take these risks very seriously and have strong systems in place for fraud prevention.

And in terms of their ability to mitigate fraud risks, both payment methods work hard to stop fraud, but real-time payment rails have an advantage. 

With RTP, transactions can be stopped right away if something looks suspicious. The banks can see what's happening and step in before it's too late. With ACH, however, by the time any fraud is found the money has already moved. Real-time payments also give businesses better tools to make sure customers and payments are legit before money changes hands.

It’s also worth noting that regardless of which payment rail you use, there are several implementation best practices that companies can follow to prevent fraud on both payment systems.

For example, proper know-your-customer (KYC) verification, setting appropriate spending limits, confirming addresses, and watching for suspicious activity can all help. Real-time payments also allow for easy account validation and two-step verification. As long as businesses focus on security best practices and follow the rules, the speed of payments doesn't have to come at the cost of increased fraud risks.

RTP vs. ACH: Which One Should Your Business Choose?

Choosing between RTP and ACH for your business ultimately comes down to your business needs and payment goals. 

If your top priority is minimizing costs for high-volume recurring payments, then ACH is a good solution for you—it's the most cost-effective option due to its lower per-transaction fees compared to RTP. However, if having same-day access to funds is a bigger priority, then real-time payments should be the obvious choice for your business.

For one-time or unpredictable "pop-up" payment scenarios like refunds, credits, or unexpected invoices, RTP capabilities are tremendously valuable when compared to the more rigid schedules of ACH payments. Real-time payments are also very helpful for irregular or unexpected payments — for example, if your customers expect quick and easy experiences like their own banking apps, real-time is better suited to meet those needs. It's also great if your business involves others through marketplaces or sharing services, since it allows payments without hassle between all parties.

While real-time payment networks are still developing, their prices should drop as more people and companies make use of them over time. This means RTP may start to make more sense even for regular bills and subscriptions that used to only use ACH. 

In short, the “best” payment rail depends on your business needs — think about how many payments you handle, when funds are needed, where you want to focus, and your tech setup. For some, the right answer could be using aspects of both systems. The important thing is evaluating your unique situation to pick the best fit for paying your suppliers, employees, and customers now and going forward.

Beyond RTP and ACH: Expanding Your Payment Options

In addition to traditional ACH and real-time payments, there are several other railways your business can take advantage of.

For starters, same-day ACH has been available for a few years, allowing funds to be transferred within a single business day rather than taking multiple days. These same-day ACH payments are facilitated through the National Automated Clearing House Association (Nacha) and can help bridge the gap when the full ACH network schedule is too slow.

The Federal Reserve has also introduced additional payment services with FedNow — a real-time settlement option for all banks. However, wire transfers continue to be an option for urgent, high-dollar payouts, though they come with higher costs than ACH or real-time networks. 

Meanwhile, digital payment solutions like Zelle have grown rapidly for peer-to-peer payments due to their ease of use and integration with mobile banking apps. They’re also convenient options for small businesses who want something more advanced than a paper check, but who aren’t ready to open a dedicated business bank account.

Other emerging solutions like payment request messaging, account-to-account transfers within payment platforms, and instant deposits to credit cards/debit cards are also creating new ways for businesses and consumers to make transactions. That being said, utilizing RTP transactions is one of the best ways to ensure your business never has to worry about monthly cash flow or sending invoices during your bank’s business hours.

Take Advantage of Real-Time Payments With Trustly

As we’ve covered, real-time payment offers huge advantages for both businesses and consumers. But if you want to fully realize these benefits, then you need the right tools to securely send and receive these payments.

With Trustly, you’ll have all the tools you need to securely access your customers’ banking information and easily send and receive payments. Not only will this reduce your total card processing costs, but Trustly’s A2A payment technology makes it easy to create a simple, end-to-end payment experience for your customers.

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